Sibling "Inheritance Tax Trap"

[Zak33]

I know this is diverse but it might help someone

Sometimes people leave their family home to a sister or brother, and not to direct descendants

It's estimated that 1 in 10 over 55's have done so in their will

in April the Inheritance Tax Free allowance for the family home is introduced which is great for parents and kids
£100k per person will added onto their tax free inheritance allowance (£325k) for both adults so £425k x 2 = £850k tax free for the kids

OK it's a lot of dough, and it goes up by £25k each per year, so by 2020 a husband and wife could leave the kids £1m inc house tax free

but not if you're leaving it to a sister or brother.

that would be £325k x 2 =£650k tax free

your sister or brother will pay 40% tax on the other £350k

You never know who it might help... keep your eyes and ears open for uncles/aunts etc who don't know about it

Over n out

[big_hairy_rob]

As someone with no family or significant other, this is very useful to know. Thank you.

[Lucio]

As someone with no family or significant other, this is very useful to know. Thank you.

Time to donate to the local animal shelter with a clause that one animal must reside within the home, accompanied by your family member for the lifetime of your family member!

Voila, he doesn't own the home, but is required by the trust to be a rent free occupant

[Saracen]

Anyone with a home worth a significant amount really ought to be thinking about their wills and IHT about now, because there have been some serious changes, both in terms of this new 'family home' allowance, and the operation of things like discretionary trusts.

This is probably going to raise some hackles, and disagreement, but most people whose estate will only come into IHT territory because of the family home want it to go to their kids. There are two main threats to that :-

1) IHT takes a large bite, but worse, you often can't even sell the house until you've paud the tax, which coukd be in the hundreds of thousands range, necessitating very ecoensive short-term bridging loans, even assuming tge beneficiaries can get such a loan, and/or

2) That the house could be sold by local authorities who charge apparently outrageous fees for 'care homes', which can deplete such an estate by several thousand pounds per week, until there's effectively nothing left.

Hence, discretionary trusts, etc, but wuth recent changes, wills ought to be reviewed to see such provisions are, first, mstill necessary, and second, still effective in light of IHT and other changes. A revised will could be as little as £100-ish, and could save a far, FAR more expensive outcome diwn the road a bit.